Growth Capital

"An excellent year for our Growth Capital business. Operating on an integrated basis across the world enabled us to grow investment and returns as well as increase the value that we add to our portfolio. We were also able to raise our average size of investment.

The further development of our business in Asia and the recent establishment of our infrastructure and US teams provide additional stimulus for the coming year."

Gross portfolio return

The Growth Capital business generated a gross portfolio return of 26% to 31 March 2006 (2005: 23%). This is the third consecutive year that the Growth Capital business has generated returns at the higher end of its return objectives.

Investment and realisations

Investment for the 12 months to 31 March 2006 was £497 million (2005: £263 million). The increase in investment was driven by several factors, including a focus on larger investments and a good contribution from our new infrastructure team. During the year, 22 new investments were made at an average of £20 million (2005: £6 million).

Included in the investment total were investments of £108 million made in other funds including I², the UK infrastructure fund, and CDH China Growth Capital Fund II.

Realisation proceeds of £855 million were very strong and significantly higher than last year (2005: £443 million). This strong performance reflects the underlying quality of the assets in the Growth Capital portfolio and the continued buoyant financial markets.

Regionally, the UK accounted for 53% of Growth Capital realisations, continental Europe accounting for 34% at £293 million was up from £103 million in 2005. Asia delivered £66 million of Growth Capital realisations (2005: £6 million).

Portfolio health

The underlying health of our Growth Capital portfolio is good. At 31 March 2006, 84% of our investments were classified as healthy, against a three year rolling average of 74%. This reflects improved investment disciplines combined with investing in larger and more established businesses in our recent vintages.

Long-term IRRs

Since the new business model was implemented, we have seen good progress against our IRR targets for Growth Capital. IRRs in the three vintages from 2003 to 2005 have produced returns that exceed our annual vintage targets, while the 2006 vintage will need time to show its full potential. Petrofac, Focus Media and Williams Lea have produced excellent results and helped to underline the quality of our recent investment performance.